RBS 2007 Annual Report Download - page 141

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RBS Group • Annual Report and Accounts 2007
Financial statements
Accounting developments
International Financial Reporting Standards
The International Financial Reporting Interpretations Committee
(‘IFRIC’) issued interpretation IFRIC 11 ‘Group and Treasury
Share Transactions’ in November 2006. Entities which buy their
own shares, or whose shareholders buy shares in the reporting
entity, in order to provide incentives to employees must
account for those incentives on an equity-settled basis.
This principle applies also to the accounting by subsidiaries.
The interpretation is effective for annual accounting periods
beginning on or after 1 March 2007 and is not expected to
have a material effect on the Group or company.
The IFRIC issued interpretation IFRIC 12 ‘Service Concession
Arrangements’ in November 2006. Entities providing
infrastructure and services to governments under concession
arrangements must account for each component of the
arrangement separately. Infrastructure provided under these
arrangements may be recognised as either a financial asset or
an intangible asset. The interpretation is effective for
accounting periods beginning on or after 1 January 2008 and
is not expected to have a material effect on the Group or company.
The IASB issued IFRS 8 ‘Operating Segments’ in November
2006. This will replace IAS 14 ‘Segment Reporting’ for
accounting periods beginning on or after 1 January 2009. IFRS
8 requires entities to report segment information as reported to
management and reconcile it to the financial statements and is
not expected to have a material effect on the Group or company.
The IASB issued a revised IAS 23 ‘Borrowing Costs’ in March
2007. Entities are required to capitalise borrowing costs
attributable to the development or construction of intangible
assets or property plant or equipment. The standard is
effective for accounting periods beginning on or after 1
January 2009 and is not expected to have a material effect on the
Group or company.
The IFRIC issued interpretation IFRIC 13 ‘Customer Loyalty
Programmes’ in June 2007. Entities that provide customers
with benefits ancillary to a sale of goods or services should
apportion the sales proceeds to those benefits on the basis of
relative fair values. The interpretation is effective for accounting
periods beginning on or after 1 July 2008 and is not expected
to have a material effect on the Group or company.
The IFRIC issued interpretation IFRIC 14 ‘IAS 19 – The Limit on
a Defined Benefit Asset, Minimum Funding Requirements and
their Interaction’ in July 2007. The net pension asset that may
be recognised by a sponsoring entity is limited to the amount
to which it has an unconditional right of refund or can be
recovered through the settlement of plan liabilities. Entities
legally bound to minimum funding requirements are required to
take account of those obligations when recognising the net
asset or liability for an employee benefit scheme. The
interpretation is effective for accounting periods beginning on
or after 1 January 2008 and is not expected to have a material
effect on the Group or company.
The IASB issued a revised IAS 1 ‘Presentation of Financial
Statements’ in September 2007 effective for accounting
periods beginning on or after 1 January 2009. The amendments
to the presentation requirements for financial statements are
not expected to have a material effect on the Group or company.
The IASB published a revised IFRS 3 ‘Business Combinations’
and related revisions to IAS 27 ‘Consolidated and Separate
Financial Statements’ following the completion in January 2008
of its project on the acquisition and disposal of subsidiaries.
The standards improve convergence with US GAAP and
provide new guidance on accounting for changes in interests
in subsidiaries. The cost of an acquisition will comprise only
consideration paid to vendors for equity; other costs will be
expensed immediately. Groups will only account for goodwill on
acquisition of a subsidiary; subsequent changes in interest will
be recognised in equity and only on a loss of control will there
be a profit or loss on disposal to be recognised in income.
The changes are effective for accounting periods beginning on
or after 1 July 2009 but both standards may be adopted
together for accounting periods beginning on or after 1 July
2007. These changes will affect the Group's accounting for
future acquisitions and disposals
of subsidiaries.
The IASB published revisions to IAS 32 ‘Financial Instruments:
Presentation’ and consequential revisions to other standards in
February 2008 to improve the accounting for and disclosure of
puttable financial instruments. The revisions are effective for
accounting periods beginning on or after 1 January 2009 but
together they may be adopted earlier. They are not expected
to have a material affect on the Group or the company.